IndexModel flips bearish for first time since May, expects selling pressure over next five days

Last week I mentioned in the comments that I would do a post describing why I rely on IndexModel for directional bias instead of a coin toss.  I did not forget.  I will write about the statistics soon and explain where the trading edge exists and why I use thorough auction research to drive my decision instead of flipping a coin like Harvey Dent.

But for now you can rest assured that last week’s call for a calm, sideways drift was bang on.  We drifted last week.  Now the model is flagging bearish.  It flipped from bullish-to-bearish, skipping over a neutral reading.

I will be shorting NASDAQ futures any time we gap up overnight and are inside the prior day’s range.  I will be playing for range extension down after the first hour of trade.  I will be a sellers at the logical price levels highlighted during the morning trading reports.  I will also use SQQQ as a proxy position trade starting Monday.

I may close SQQQ before Thursday because we have a wildcard Thursday.  But maybe I won’t.  Nvidia reports Thursday.  The company has been an absolute success and anyone shorting NVDA has been made to look like an imbecile.  But much of the company’s recent success has been tied to crypto mining.  Cryptocurrency has been in the doghouse all 2018.  That could impact Nvidia’s recent growth trajectory.

If Nvidia reports soft revenues and guides lower on earnings, how will the markets react?

We don’t know.

But we do know that there is a wildcard Thursday.  And we know the IndexModel is bearish.  You don’t know whether or not the IndexModel is any more useful than a coin toss.  But I do.

That’s everything we know.

Walmart report this week and so does Home Depot.  The quarterly earnings from these two companies are much more indicative of the state of the overall economy than any government statistic.  Pay close attention to them as well, but NVIDIA is the name I am watching the most.

The RAUL blog is bearish until otherwise noted.

Trade accordingly.

a’dios muchachos

Exodus members, the 195th edition of Strategy Session is live, go check it out!

NASDAQ futures are coming into Friday gap down after an overnight session featuirng elevated range and volume.  Price worked lower overnight, trading back down into Monday prices.  As we approach cash open price is hovering around Monday’s midpoint.  At 8:30am Consumer Price Index data came out slightly better-than-expected.

There is a monthly budget statement at 2pm and no other economic events.

Yesterday we printed a normal variation up.  The day began flat and after a two-way morning auction price worked higher.  We tagged the upper ATR band from the Sunday Strategy session 7505.25 nearly to the tick then began to drift lower.

Heading into today my primary expectation is for buyers to work into the overnight inventory and test up to 7460.25.  Sellers reject a move back into Thursday’s range and two-way trade ensues.

Hypo 2 stronger buyers work a full gap fill up to 7475.75 and take out overnight high 7477.50.  Look for sellers up at 7481.25 and two way trade to ensue.

Hypo 3 sellers gap-and-go lower.  Look for buyers down at 7415.75 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Thursday with a slight gap up after an overnight session featuring normal range and volume.  Price worked sideways overnight, holding inside the Wednesday range.  At 8:30am initial/continuing jobless claims data came out mixed.

There is a 30-year bond auction at 1pm.  There are no other major economic events.

Yesterday we printed a normal variation up.  The day began gap down and after a choppy open buyers worked the overnight gap shut then continued higher, to a new weekly high before two way trade ensued.

Heading into today my primary expectation is for little movement.  Buyers work up through overnight high 7486.25 setting up a move to target 7505 before two way trade ensues.

Hypo 2 sellers work into overnight inventory and close gap down to 7469.25 then take out overnight low 7458.75.  Look for buyers down at 7450 and two way trade to ensue.

Hypo 3 strong buyers sustain trade above 7505.25 setting up a  run for all-time-highs 7530.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Wednesday gap down after an overnight session featuring normal range and volume.  Price was balanced overnight but as we approach cash open a bit of selling pressure has pushed us near Tuesday’s low.

On the economic calendar today we have crude oil inventories at 10:30am and a 10 year Note auction at 1pm.

Yesterday we printed a normal variation down.  The day began with a gap up and wide open auction.  Buyers stalled just before putting us RE up and we traversed the daily range to go RE down by a few ticks.  Sellers were not, however, unable to close the Monday gap.  Instead we closed near session high.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the overnight gap up to 7477.75.  From here we continue higher up through overnight high 7481.75.  Look for sellers up at 7494.25 and two way trade to ensue.

Hypo 2 sellers gap and go lower, down to close the gap at 7444 then look for buyers down at 7438 before two way trade ensues.

Hypo 3 stronger buyers trade up to 7505.25 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

I will explain everything you need to know about Tesla in less than two minutes.

But first a brief programming note.  If you believe that Elon Musk was sent to Earth to shepherd mankind to new planets while saving our dear blue planet, there is a tribe for you on Stocktwits.  A feature launched last week called ‘groups’ and it allows members to form private gathering places.  As an elected community organizer for Stocktwits Detroit, it was my civic duty to form The Disciples of Elon.  

The Disciples of Elon exists only to spread the good word about Tesla, SpaceX, and Our Dear Leader.

Stocktwits is not paying me, nor is Elon Musk (Praise!) but I am long a considerable amount of TSLA stock.  The only compensation I’ve received is a Stocktwits tee shirt.  Here I am wearing it:

NOTE: None of the other upstanding citizens pictured above are Disciples of Elon.

Anyhow here is what you need to know about Tesla.  The people who matter, the same people who banished InfoWars to the deadlands of the internet, have faith in Tesla.

That’s everything you need to know about Tesla.  I told you it would take two minutes.

#BULLISH

ciao ciao kiss kiss

NASDAQ futures are coming into Tuesday gap up after an overnight session featuring normal range and volume.  Price worked higher overnight, trading up near the gap left behind on 07/25.  As we approach cash open prices are balancing out up beyond Monday’s high.

On the economic calendar today we have a 4-week T-bill auction at 10am, a 3-year Note auction at 1pm, and consumer credit at 3pm.

Yesterday we printed a double distribution trend up.  The day began flat then with a buying drive off the open.  Price continued higher in the late morning after a brief two way auction above the daily midpoint.  The day ended with the market continuing to explore higher prices.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 7444.  From here we continue lower, down through overnight low 7437.  Look for buyers down at 7436 and two way trade to ensue.

Hypo 2 buyers reject a move back into Monday’s high 7448.25 setting up a move to take out overnight high 7474.50.  Look for sellers up at 7495.50 and two way trade to ensue.

Hypo 3 stronger buyers trade us up to 7505.25 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Monday with a slight gap down after an overnight session featuring normal range and volume.  Price worked sideways overnight, marking time.  After spending most of the evening trading above last Friday’s high, price has settled back into the Friday range as we approach cash open.

Last week also began flat, then with sellers driving prices lower off the open.  The downward action discovered a strong responsive bid by Monday afternoon.  The Monday responsive buy would ultimately market the low of the week.  We were gap up into Tuesday and another attempt lower was met with strong responsive buying.  Wednesday marked time, even through the FOMC decision.  Thursday was a dynamic trend up. Friday slightly extended the gains and marked time.  The last week performance of each major index is shown below:

On Friday the NASDAQ printed a normal day.  The first hour of trade was wide enough to contain the rest of the trading session.  This is an uncommon occurrence and speaks of a lack of higher time frame participants.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 7402.25.  From here we continue higher, up through overnight high 7424.25.  Look for sellers up at 7425 and two way trade to ensue.

Hypo 2 sellers press down to 7379.25 before two way trade ensues.

Hypo 3 stronger buyers press to 7456.75 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

It feels like the financial markets will be on autopilot these next five days.  All the big NASDAQ movers already reported earnings.  The most debated business concept of the last 50 years (praise!) passed their Wall Street pressure test.  And now IndexModel, which I prepare as part of the Exodus Strategy Session is flagging bullish.

The model isn’t calling for a major rally.  Just a calm, sideways drift.  Perhaps with a slight upward bias.

Is that useful?  Can you make money off that call?

I don’t know.

This is research for a style and approach that works for me.  A trading edge broadcast live on an obscure finance blog by an Italian with a Mexican pen name.  I just happen to be alumni from a time when legendary traders blogged.  I stuck around when they all started hiding in private chat rooms.  I’m a ghost from back when trading seven figures on 3x leveraged ETFs was a thing.

Who remembers The Devil?

Now I’m solely responsible for showing traders how to stand on the front lines when institutions are throwing around big bands.  So when I write about the game it matters more.  All the roll models are gone.  Don’t make me talk about prolific advisors.

Anyways the model is bullish.  I’ll be looking to buy overnight down gaps when we are trading inside the prior day’s range.  Also I’ll buy when the algos I coded into MultiCharts fire out signals.  I’ll put size on as soon as possible then go to work scaling pieces off, methodically, to lower my cost basis.  I’ll be watching support levels, for bidders, and joining them.  Even if only for a scalp.

I won’t be pressing long positions as aggressively as I did last week.  Without a catalyst, and with the IndexModel expecting drift, I plan to capture 6 points here, 12 points there, and so on. 15 points, book it.

Anyhow I’m rambling.  Models are bullish. Exodus members; the 194th Strategy Session is live.  Make sure you check out the research on the NASDAQ Transportation index.

NASDAQ futures are coming into Friday with a slight gap up after an overnight session featuring normal range and elevated volume.  Price took out the Thursday high overnight, further pushing into last Friday’s range before sellers stepped in and balance ensued.  As we approach cash open price is hovering just above the Thursday high.  At 8:30am non-farm payroll data came out better-than-expected.

Also on the economic agenda today we have non-manufacturing/services composite data at 10am.

Yesterday we printed a trend up.  The day began gap down and buyers drove higher right off the open.  Then they took out the Wednesday high.  Then they reclaimed most of the losses seen late last week.  Price was trend up nearly all day, eventually coming into mini balance along 7375.

Heading into today my primary expectation is for buyers to work up through overnight high 7415 to tag 7425.75 before two way trade ensues.

Hypo 2 stronger buyers trade up to 7457 before two way trade ensues.

Hypo 3 sellers press down through overnight low 7379.25 to tag 7362.25 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Thursday gap down after an overnight session featuring extreme range and volume.  Price mostly worked lower overnight after being in balance until about midnight New York.  At 8:30am initial/continuing jobless claims data came out better than expected.

Also on the economic agenda today we have factory and durable goods orders at 10am.

Yesterday we printed a normal variation down.  The day began gap up and after sellers closed the gap we spent the first hour of the session auctioning higher.  Sellers stepped in before 10:30am, right around where they drove lower from Monday, and high-of-day was set.  Price chopped near session low up until the FOMC rate decision.

After the Fed left their benchmark borrowing rate unchanged we saw little reaction but ultimately buyers stepped in late in the session and slowly moved price higher before we fell back to the midpoint by end-of-day.

Heading into today my primary expectation is for buyers to work into the overnight inventory and tag Wednesday low 7241.  Sellers reject a move back into the Wednesday range setting up a move to take out overnight low 7214.25.  Look for buyers down at 7200 and two way trade to ensue.

Hypo 2 gap-and-go lower, trade down through 7200 and sustain trade below it setting up a move to target 7134.25 before two way trade ensues.

Hypo 3 buyers reclaim Wednesday low 7241 and sustain trade above it setting up a gap fill up to 7272.50.  Buyers continue higher, up through overnight high 7293.25.  Look for sellers up at 7300 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves: